tv Nightly Business Report PBS February 15, 2011 1:00am-1:30am EST
>> tom: president obama releases his 2012 budget proposal, cutting the deficit by more than $1 trillion over a decade. but republicans say it's not enough. >> the only way we can make these investments in our future is if the government starts to live within its means. >> this tells small businessmen and women, this tells all entrepreneurs that the more we borrow and spend today, the higher their taxes will be. >> susie: when it comes to spending, we'll look at what's in and what's out. you're watching "nightly business report" for monday, february 14. this is "nightly business report" with susie gharib and tom hudson. "nightly business report" is made possible by:
this program is made possible by contributions to your pbs station from viewers like you. captioning sponsored by wpbt >> susie: good evening everyone. $3.7 trillion. that's the size of this year's budget president obama sent to congress today. the president called his new spending plan one of "tough choices and sacrifices." republicans bashed it, tom, and so did anyone connected to a program that got downsized. >> tom: susie, there are lots of cuts. the president's budget aims to slash $1 trillion over the next decade. three quarters of that money comes from spending cuts, and the balance is from tax increases or the elimination of existing tax breaks. >> susie: the new budget also proposes spending increases in areas like education, energy
efficiency and high-speed rails. but as darren gersh reports, the president's plan makes a modest start on filling a budget hole that can only be described as huge. >> reporter: when you are in a hole, stop digging. that's rule number one. rule number two is figure out how deep you've dug yourself in. on the federal budget, the answer is very deep. over the next decade, the obama administration figures we're $9.4 trillion in the red. speaking at a school, the president defended spending on education and technology, but said his cuts will cut in half the red ink he inherited. >> the budget i'm proposing today meets that pledge, and puts us on a path to pay for what we spend by the middle of the decade. we do this in part by eliminating waste and cutting whatever spending we can do without. >> reporter: here's how the president proposes to fill the budget hole. freezing spending for everything except defense, medicare, social
security fills in $406 billion. winding down the war in iraq and afghanistan saves $1.1 trillion. the budget assumes the bush tax cuts expire and calls for tax and fee changes worth $544 billion. add up all the president's cuts and you still have a hole of $7.2 trillion dollars, as republicans like house budget committee chairman paul ryan were quick to point out. >> the president punched it on the budget, on the deficit and on the debt. that's not leadership. that is an advo case of leadership. >> reporter: for perspective, the president's debt commission, recommended filling the budget hole with almost $4 trillion in tax increases and spending cuts, including changes to social security and medicare. but the administration ruled out any immediate changes to social security, and the president only hinted at what might be written in future budget books. >> so what we've done here is make a down payment, but there's
going to be more work that needs to be done, and it's going to require democrats and republicans coming together to make it happen. >> reporter: one of the most alarming numbers in the budget gets very little attention. a huge chunk of the deficit-- $5.7 trillion-- goes to pay interest on the national debt. darren gersh, "nightly business report," washington. >> tom: here are the stories in tonight's n.b.r. newswheel: a mixed close on wall street. the dow lost five points, the nasdaq added nearly eight and the s&p 500 up three points. big board volume was moderate at 815 million shares, while nasdaq volume weighed in just under two billion. deutsche boerse and n.y.s.e. euronext have reportedly reached an agreement on the broad outlines of a merger. the deal would create the world's largest exchange. reuters says deutsche boerse c.e.o. reto francioni would chair the new venture. but there could be a wrinkle involving the c.m.e. group, the
world's top derivatives exchange group. fox reports the c.m.e. may make a hostile bid for n.y.s.e. euronext. the exchange told us it doesn't comment on rumors. tarp special inspector general neil barofsky has resigned, effective march 31. the program's money invested in banks, automakers and housing companies during the financial crisis. barofsky's prosecuted waste, fraud and abuse in it. and the re-opening of the egyptian stock market has been delayed again, until at least sunday. it was expected to re-open wednesday. the exchange has been closed since january 27, the start of the protests that led to the resignation of president hosni mubarak. >> reporter: i'm erika miller. coming up this valentines day, i'll take you behind the scenes at the diamond district with the c.e.o. of blue nile, the online jewelry site. >> susie: 18 u.s. banks have failed so far this year, and all were small, community banks. local banks are the lifeblood of inner-city neighborhoods and
small towns, but many have been pummeled in the recession because of bad real estate loans. in chicago, a new community bank is rising from the ashes of a failed one. diane eastabrook reports. >> reporter: chicago's gritty south side is an area few large banks serve. but some of wall street's heaviest hitters, including wells fargo and j.p. morgan chase, are behind urban partnership bank. the bank opened last summer after big lenders put up roughly $145 million in capital for the assets and deposits of the failed shore bank. shore bank was a chicago institution for more than 30 years. urban partnership's leaders, william farrow and david vitale, call the new bank a win-win for the community and the big banks. >> the customers we serve have to be served by somebody, and you don't want to go back to the '70s or '80s when it took the government to force that to happen. but they would certainly have gotten encouragement to come in
and serve these communities one way or another. >> reporter: in the past couple of years, more than 300 u.s. banks have failed, collapsing under the weight of bad commercial and residential real estate loans. most, like shore bank, were community banks with assets under $10 billion. about half of the loan portfolio urban partnership assumed is still at risk. so farrow says the bank is focused on restructuring those loans and counseling customers. >> we've actually had customers come in while we're trying to do this and say, "you're the best resource that we have to understand how we make money, to understand my business plan and my balance sheet as a bank." >> reporter: urban partnership wants to take a different course than its predecessor, relying less on real estate loans and more on business loans. it also wants to market basic banking services to the locals. since inner city neighborhoods are notoriously underserved by lenders, many residents don't have checking or savings accounts. geoff smith is a senior vice president at woodstock institute, a chicago nonprofit that studies fair lending.
he thinks those services are critical to the survival of distressed communities, but he admits providing them isn't easy. just because they open up shop doesn't mean all the problems will be solved. i think it's going to require patience to get the job done. but this is the type of institution that needs to be there to make it happen. >> reporter: urban partnership thinks its strategy can bring stability, new business, and jobs to a community in need. diane eastabrook, "nightly business report," chicago.
>> tom: in the big business of professional athletics, there's a constant battle between tradition and creating new profits. tonight's "beyond the scoreboard," our look at the business of sports, starts with the business of the sacred sports jersey. rick horrow is a sports business analyst and c.e.o. of horrow sports ventures. >> i will start by wishing you a a happy valentine's day. >> back to you. >> tom: let's talk about the sacred sports jersey. a new study finds the major professional leagues in the u.s. are leaving $370 million on the table by not taking corporate sponsors on their shirts is so let's talk about this. if it's off limits, does nike, does under-- armour do they lose. >> here's the bottom line that validates that number. the european soccer league, generated over $155 million in those 20 teams and fc barcelona just signed a deal with middle eastern an
country qatar for 40 million a year so we understand there is significance dollars over there that ought to be tapped somewhere. >> tom: right now the only logos we see on these big jerseys the nike swish, maybe adidas could be there. nike in 2012 is due to be the official team jersey maker for the nfl assuminging there is a season. is this a big contract for nike? >> well, it is. if they will allow them to go beyond the practice jerseys which the nfl teams currently --. the numbers we're not sure of. it certainly is a big contract to keep their dreaded competitor adidas at bay. >> tom: speaking of which, another supplier, adidas had said it plans to outgrow nike overseas over the next several years and their stock charts look very similar, each up about 35% over the past year. so what does a didas need to doness with the first thing is to perpetuate their chinese growth at about 10 or 15 percent a year. by that 1.3 billion dollars of revenue in china. so you take a look at a market like that which is a significant emerging nation and grab as much as you can.
>> tom: these companies are dealing though with higher commodity prices like cotton and rubber, like a number of different consumer oriented companies. does that, is that a big risk? >> risk/reward. the bottom line is china and their 10% increase in gdp, the fact that wal-mart and gap and some of those companies are making a big line in the sand to try to grow as much as they can. so you bring that reward, will you obviously take a risk-- risk. >> and the growth comesñi from feeding the commodity higher costs. the daytona 5 -- kicks off the nascar season this coming weekend asçó nascar trying to reshape this season, bring back advertising dollars, bring back an audience, bring back ticket buyers. the international speedway which is the owner of the daytona track has really seen its stock pla toe recently. what is at stake for nascar. >> at stake is the momentum that they generated as the fastest growing sport over a previous ten year period. if you accept the fact that they are trying to grow outside the box, a survey just said that 37% of their fans said they were worse off last year. so they have to make sure they translate the reduction
of attendance in creativity. >> tom: the other big raceway owner which is speedway motorsports has been trending lower. what role do these track owners play with this? >> they are the landlords but they also have the event. so they've got to be entertaining. they have to make sure they give the fans the experience so they will come back. the story about nascar this week at daytona is they are a you lag fans to take in 36 cans of beer when they only had 6 hast year. so there is a key. >> tom: are you selling coolers out in the parking lot. >> yes, sir. >> tom: rick horrow, c.e.o. of horrow sports ventures it was kind of a slow beginning for this trading week. let's get you updated in tonight's market focus. >> tom: it was a mixed finish for the major indices, with the dow industrials unable to end in positive territory. ending slightly lower. wal-mart weighed on the dow, falling more than 1%.
clearly trying to move lower. since its high in january, it has dropped 5%. a trio of analysts have downgraded shares this month. j.p. morgan was the latest. the analyst worries have centered around expectations of weak holiday sales, that tough environment continuing and more grocery competition. morningstar senior analyst r.j. hotavi doesn't think it's time to buy, even with the pessimism. the old adage is that when enough people are saying t is time to dot opposite thing here. i don't know if that's the case. i think that we will see pressure when a company reports fourth quarter numbers and they may have a pretty dim view, the market may have a pretty dim view of what the company's guidance may be. >> tom: now top topping the dow was exxon mobil, adding 2.5%, rising to a new 52- week high and doing it with heavier-than-usual volume. energy was the strongest sector overall, led by refiners tesoro, marathon oil and valero.
all hitting new 12-month highs on stronger volume. raymond james raised earnings estimates, thanks to cheaper benchmark west texas crude oil compared to other types, with that helping margins. one more energy note-- chevron texaco today was ordered by a judge in ecuador to pay $8.6 billion to residents over oil pollution. now chevron has promised to appeal. shares gained a little over 1% despite the news. mining and metal stocks helped the basic materials sector continue its rally. this basic materials e.f.t. rose to a new high over the past year. china saw an increase of exports and imports, all fueling hopes it will continue to have a big appetite for global commodities. take a look at a trio here. iron ore producer cliffs natural jumped almost 6%. iron ore is used to make steel. copper and gold miner freeport mcmoran added 5%. copper hit a record high today
and titanium metals added 4.5%. m.g.m. continues to be very active, trading almost 50 million shares. the stock fell 3% as revenue fell at most of its las vegas casinos last quarter. seeing a bit of a sell-off here. a couple of deals. the private equity buyout of emergency medical services came in at $64 per share, below were the stock was trading on buyout rumors. well below where it was trading at. the stock dropped 11%. and dish network owner echostar will pay $60.70 per share for broadcast satellite firm hughes communications. stocks going in opposite directions. you may want to watch fedex tomorrow. after the close, it cut its profit target, blaming bad weather and higher fuel prices. fedex has been at the top of its range, in the low to mid 90s. it was off 1.5% before the warning. all u.p.s. has said so far is that the blizzards this year will be a "headwind" for it. shares were down a fraction
today, but just off from a new high hit last week. and that's tonight's "market focus." >> susie: valentine's day is one of the most popular days for popping the question, and giving diamond jewelry as gifts. that means big business for companies like bluenile, the online jewelry store. when the company was launched during the dot-com boom, few thought it would last. but now it claims to be the largest seller of fine diamonds in the world-- more than
tiffany. in tonight's "shoptalk," erika miller has this behind-the- scenes look at the company. >> once he decided to propose dan did something many people would never consider, he logged on to blue nile, scrolled through thousands of certified diamonds and purchased this ring sight unseen. >> i just didn't like the idea of going and sitting down in some back room or something making a purchase like that with someone i never met before. i was much more comfortable being able to quantify everything and ultimately it is a commodity. so it just felt good knowing exactly what i was getting. >> reporter: he says he hiss got peace of mind from the site's 30 day money back guarantee, not that he needed it. >> i absolutely adore it. it's exactly what i wanted. it's sparkley and clear and i love the cut. he did a great job. >> reporter: before the diamond ended up on jackie's finger it started out in its
secret location in new york's diamond district. we can't divulge where. but it's here that craftsmen spend weeks, even months cutting and polishing the gems and preparing them for shipment to seattle where blue nile is based. blue nile c.e.o. diane irvine says not having to operate stores means lower overhead and that savings gets pass add long to customers. >> we are selling at prices that are 20 to 40% below a typical jewelry store but at the very high end of quality so it's this delicate balance where we have a premier brand but such a great value for the customer. >> reporter: as a result, she says the site's average customer spends about $6,000 on a diamond ring, twice the industry average. when blue nile was launched in 1999, there were plenty of skeptics who couldn't imagine people would buy diamonds on-line. but they did. and the the company went public in 2004. revenues hilt a record $332 million last year. the stock has had its ups
and downs, recently hitting a 52-week high. but analyst paul sween-and-advises against buying the shares. >> i view the stock as overvalued and i view the competition as heating up so i'm negative on the stock right now. >> reporter: neighborhood jewelry stores have been hit hard by blue nile's successment but now the site is taking direct aim at the nation's most prestigious jewelry chain. the company wants customers to view it as in the same league as tiffany. but some analysts are doubtful the strategy will work. >> i don't think tiffany has anything to worry about. tiffany views itself as a creator of, you know, artwork and jewelry. their markets are very, very high but -- markups are very high but their customer experience is very different. >> reporter: the company sees a big growth opportunity in mobile sales. already blue nile customer does a quarter of all searches by tablet or smart phone. >> they can shop throughout the day. they can now price compare with our iphone app. so physically walk into a
jewelry store and compare our diamond quality and pricing to a store and i feel like we win all day long when that takes place. >> select checkout blue nile, the site has grown in popularity because of its large diamond selection. it also says lean overhead leads to lower prices. the company is trying to steal customers from tiffany but some analysts are skeptical that will happen. blue nile is also focused on increasing mobile sales. of course one of the best ways to boost sales is word of mouth. customers like dan were delighted with their shopping experience. >> it flawless, yeah. erica miller, nightly business report, new york. >> susie: here's what we're watching for tomorrow: quarterly results from dell, the january reports on retail sales and import prices. and, we'll get the outlook for housing this year with k.b. home c.e.o. jeff mezger. also tomorrow, we could get that big announcement from the big board about a merger with germany's deutsche boerse.
from bankruptcy to bonuses in under two years. published reports say general motors will pay almost $200- million in profit-sharing to its hourly workers and millions more to its senior executives. the payments are in place of salary increases and will reflect the automaker's solid financial performance last year. the bonuses are expected to be formally announced later this month, when g.m. reports earnings. >> tom: no doubt you've heard of 3d movies and televisions, how about a 3d phone? check this out. korean handset maker l.g. is rolling out the first one. it has a 3d screen and a special double camera. users will be able to watch videos without wearing those funky glasses. the smartphone is called optimus. it has souped-up insides, allowing it handle 3d processing. no date yet on when the new phone will be on the market.
that you can file for free. >> for years the irs as been pushing taxpayers to do our returns on a computer and file electronically. doing so saves the government pun, and it reduces the likely hood of errors. the government even convinced commercial software firms to offer freeñi on-line tax prep programs under its free file program. there's a catch though, if you make tap much money, you can't use the programs offered at irs.gov. this year you are out of reach if your adjusted gross income exceeds $58,000. but you can still file free electronically. the irs has another option that is open regardless of income and that is particularly appealing to folks who still like to do their returns on paper. once you have done your forms, log on to free file fillable forms.com and transfer the numbers to the on-line forms. now this isn't a program that offers advice or figures your tax bill. but it will catch mather rohrs and most importantly it will let you file your federal return electronically. if you have a refund coming and have it deposited
directly to your bank account that means will you get your money in a matter of days instead of waiting a mat-- matter of weeks. if you are more likely to owe money, there is a deal for you too. cch the tax publisher think those taxpayer should haveñi to pay for the privilege of figuring out how to send to the irs so it is waiving the normal charge for at on-line tax prep program pretax if your bottom line shows you owe. this does offer step-by-step guidance as well as free electronic filing. you can find it at complete tax.com. i'm kevin mccormally. >> susie: tomorrow, kevin tackles what's called the "making work pay" tax credit. and if you have a tax question you want kevin to answer, he'll be happy to do that. just log on to our website, nbr on pbs.org. >> tom: finally, it's valentine's day. earlier we took you to new york city's diamond district, with four- and five-figure gifts. while those aren't the norm this
year, people are putting aside their penny-pinching ways, kind of. on average, lovebirds are expected to spend about $116 dollars, with men spending twice as much as women. spending per person should beat last year by 12%, according to the national retail federation. flower sales alone are expected to rake in more than $1.5 billion. slightly less will be spent on chocolate. greeting cards will take in just over $1 billion. another big money-maker today? dining out. susie, couples will spend $3.5 billion on meals today. >> nobody waningts to do dishes on valentine's day, couples will spend $3.5 billion on meals. >> i got a beautiful bouquet of red roses and i think dinner is the next stop. >> tom: you're welcome for the roses, by the way, susie. that is nightly business report on this monday, february 14th. happy valentine's day. thanks for joining us. have a great night, susie. >> susie: good night, tom. i hope you have a nice valentine's as well. i'm susie gharib-- gharib. good night everyone, thanks for watching. see you tomorrow